Investors Continue Waiting On Sidelines For Tangshan Jidong Cement Co.,Ltd. (SZSE:000401)

With a price-to-sales (or "P/S") ratio of 0.6x Tangshan Jidong Cement Co.,Ltd. (SZSE:000401) may be sending bullish signals at the moment, given that almost half of all the Basic Materials companies in China have P/S ratios greater than 1.3x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Tangshan Jidong CementLtd

What Does Tangshan Jidong CementLtd's P/S Mean For Shareholders?

Tangshan Jidong CementLtd has been struggling lately as its revenue has declined faster than most other companies. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Tangshan Jidong CementLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Tangshan Jidong CementLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Tangshan Jidong CementLtd's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. As a result, revenue from three years ago have also fallen 33% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 10% as estimated by the four analysts watching the company. With the industry predicted to deliver 11% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Tangshan Jidong CementLtd's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've seen that Tangshan Jidong CementLtd currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Tangshan Jidong CementLtd you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.